Although there are still many people who deny that climate change is occurring, the overwhelming majority of scientists and climatologists believe they already have conclusive proof that climate change is underway and will only get worse.  Will this affect your real estate investments?  Yes, either directly or indirectly.

Climate change is generally centered around the increasing temperature of the earth’s thin biosphere caused by increasing carbon emissions and heat trapping gasses.  The effects are many and varied, and they go well beyond days being a couple degrees hotter on average.  For real estate investors – especially long term buy & hold investors – what do you need to consider?

  • Sea level rise causing flooding: Sea levels have already started rising a bit.  However, there are bigger concerns than the immediate effects.  Small average rising temperatures can become self-reinforcing since the higher temperatures are retained as new baselines and heat increases on top of that.  Melting reflective ice eliminates that cold sink for the planet, in addition to directly adding more water to the oceans.  And warmer water expands just enough to make an appreciable difference over thousands of miles of ocean that are thousands of feet deep.  For anyone considering purchasing waterfront condos, SFR, retail, office, marinas, or anything else on the water, it is important to plan for high tides becoming higher over the long term.  Also, as effects start being noticed and investors become more aware, investors will pay progressively less for locations that may be risky and also hard to fully insure.
  • Increasing weather extremes increase risk of property damage: One of the effects of increasing temperatures is increasing extremes in weather conditions.  Some people point to an occasional new record LOW temperature on a particular day as an anecdotal indication that climate change is not real.  What they miss is that weather extremes across the board are a part of average temperatures rising.  Extremes will directly result in property damage from wind, rain, heat, wildfires, and cold to exteriors, roofs, parking lots, and put more stress on HVAC systems.  More extreme weather events such as hurricanes and tornadoes will become more prevalent and forceful, plus spread to more locations.
  • Increasing heat increases water evaporation and creates a lot more rain: Increasing heat results in increased evaporation, volume of rain events, and flooding potential.  That in turn may over-burden drainage systems, create ponding issues for crawlspaces, create infiltration issues for foundations, cause landscaping erosion, and increase hillside erosion.  In other areas, weather extremes may actually cause drought and decrease the desirability of that area for residents, farmers, and businesses.
  • Weather extremes also raise flood levels well above averages: Even if average